The best collections strategies don't start after a missed payment. They start long before.
Early engagement is no longer optional. Regulators expect it, customers value it, and the economics support it: every account you keep out of arrears is one you never have to collect. This guide covers what a pre-arrears strategy involves, the warning signs worth building alerts around, the practical obstacles to getting one running, and how to know whether it's working.
The people at risk of arrears are not the people you might expect. StepChange's research into working households found around 2.8 million UK adults in full-time employment already in problem debt, half of everyone in problem debt overall. Its latest client data shows the pattern continuing: 60% of people seeking its help in 2025 were in work, 44% of them full-time (StepChange Statistics Yearbook 2025).
The wider picture is no better. The FCA's most recent Financial Lives survey found 13.1 million UK adults with low financial resilience and 26.4 million with characteristics of vulnerability (published May 2025). StepChange's January 2025 polling put two in five UK adults as struggling to keep up with their bills.
Where the pressure is landing has changed. Mortgage arrears have been easing, down to £19.7bn in the second quarter of 2026, the lowest since 2023 (Bank of England). Household bills are moving the other way. Energy debt and arrears reached £4.79bn in the first quarter of 2026, up 15% on a year earlier (Ofgem), and the National Audit Office put combined energy and water debt at more than £7bn (June 2026). The pressure has shifted from secured lending to essential services, which is exactly where early intervention matters most.
A thoughtful pre-arrears strategy allows us to act sooner, reduce harm, and offer real support when it matters most. That's how we build trust, meet our obligations under Consumer Duty, and deliver long-term value for both customers and our organisation.
James Hill, CEO, Flexys
Against that backdrop, a collections team without automation is already stretched, working the accounts that have missed payments. Adding customers who haven't missed one yet looks like more work for less return. It isn't, for five reasons.
It encourages people to come to you first. A culture of openness about debt gets customers in touch before the missed payment, not after. If they can see what help exists and that you'll be flexible, contacting you stops feeling like an admission of failure.
It improves collections outcomes. More notice means more time to reach someone and agree something workable. Every case of arrears avoided is a case that never enters the cost base, and never needs provisioning.
It manages regulatory risk. Consumer Duty requires firms to avoid foreseeable harm and to support customers in pursuing their financial objectives. The FCA's rules for borrowers in financial difficulty now extend to customers who may have payment difficulties, not only those who already do (PS24/2, in force November 2024). In May 2026 it said lending products should include clear triggers to refer customers to specialist teams and a way to agree temporary arrangements before arrears escalate. The FCA does not require firms to identify every at-risk customer. It does expect defined trigger points and timely action when they fire.
It's the right thing to do. Supporting customers across their financial lives, not only at the point of default, is what the industry has been moving towards for years.
It protects the relationship. Customers, younger ones especially, prefer organisations that notice and tell them early. Handled well, a pre-arrears intervention is the moment a customer decides to stay with you for their next product.
A pre-arrears strategy is only as good as the signals feeding it. Three categories are worth monitoring, and each can drive an alert in your collections system.
Customers rarely contact creditors unless something is wrong. Contact patterns across customer support are a useful early indicator: challenging a bill, moving payment dates, special tariff applications, making a complaint, seeking clarification on payment terms, or sharing information about vulnerability.
Individually, none of these means much. Aggregated, they point to difficulty and can trigger a pre-emptive approach.
Data can predict arrears risk well before the first missed payment. The touchpoints worth watching fall into three groups.
Recent credit behaviour. Rising credit utilisation, minimum-only payments, and late payments on other obligations.
Cross-product warning signs. Late payments on utilities or phone bills, which are often reported before traditional credit; increased use of short-term credit; rising balances on revolving accounts; bounced payments.
Relative changes. Sudden shifts in spending, deviation from historical payment behaviour, changes in credit mix, or a jump in credit-seeking.
Using data to identify customers who would benefit from signposting to budgeting help or debt management support is crucial, but we must do so responsibly and avoid being intrusive.
Sam Challenger, Executive Leader, Operations, Collections and Customer Experience
With customer consent, Open Banking lets you assess creditworthiness continuously by analysing categorised transaction data, giving early insight into ability to pay. It surfaces indicators that traditional data misses: income shock, increased overdraft use, returned Direct Debits.
This is no longer niche. Open Banking user connections in the UK reached 16.5 million by December 2025, up 36% in a year (Open Banking Limited). Used across the credit lifecycle, the data informs early warning strategies and prompts engagement at the point risk appears, so you can offer a payment arrangement that keeps the customer out of collections altogether.
Read more about how Open Banking works in collections.
Proposing a pre-arrears strategy is one thing. Delivering it depends on four capabilities.
Actionable insights. You'll need to gather and aggregate multiple indicators to build an accurate picture of a customer's situation. One signal on its own produces false positives and wasted contact. A centralised, flexible data structure is a significant advantage, because the value comes from combining signals that usually sit in different systems.
Strategic communication. Not everyone welcomes an offer of support. Acknowledging that sensitivity, and explaining your approach clearly and compassionately, is what determines whether people engage. Timing and channel matter too, and pre-arrears communications differ from collections communications. Money Wellness found that 13% of its online debt advice was accessed between 10pm and 3am (Impact Report, December 2024). People confront their finances when the house is quiet. That says something about when your support needs to be available, and about the value of self-service that doesn't depend on opening hours.
Team structure. Running pre-arrears activity raises practical questions: who owns it, how it integrates with existing collections processes, what it does to workload and budget, and how to align support hours and minimise hand-offs.
Workable support solutions. Once customers engage, they need options: customisable payment terms, variable repayment schedules, restructuring, signposting to budgeting tools or free debt advice, and benefits calculators for income maximisation. Financial recovery is rarely linear, and the support has to reflect that.
Expect resistance. A pre-arrears strategy doesn't fit a purely financial measurement framework, and it contradicts the conventional definition of debt management as something that begins after a missed payment. The case has to be made in terms of both outcomes and economics, because they point the same way.
Pre-arrears work is subtle and time-sensitive. It needs accuracy and adaptability. Take an honest look at your current system: how quickly it operates, how easily it can be configured, whether it integrates the channels you need, and whether its data structure can support the signals above. Many systems built for post-default collections cannot run this at all. Here is what a collections system built for this looks like.
Different stakeholders have different priorities. Aligning them means showing the link between customer outcomes and financial performance rather than treating them as a trade-off.
Pre-arrears performance is harder to measure than collections performance, because success looks like an absence: the arrears that never happened. Judge it on three things alongside the financial metrics.
Customer outcomes. Did the customer end up in a better position, regardless of the financial result on that account?
Customer satisfaction. Some of the most useful feedback comes from customers helped at their lowest point. Ask for it, and monitor reviews.
Impact on lives. Celebrate the cases where a measurable difference was made to a household. These stories change internal culture faster than a dashboard does, and they encourage other customers to ask for support.
A pre-arrears strategy is more than an operational approach. It's a position on what the relationship with a customer is for. The strategies that work balance the technology with human judgement, and they treat data as the means of finding people who need help sooner, not as an end in itself.
Flexys identifies accounts at risk before a payment is missed, and gives your team the workflows to act on it. Talk to a collections specialist about what that looks like in your operation.
Talk to a collections specialistA set of processes for identifying customers at risk of missing a payment and intervening before they do. It combines early warning signals from customer contact, credit behaviour and payment data with a defined set of support options.
Early arrears begins after a payment is missed, typically in the first 30 days. Pre-arrears happens before any breach. The customer is up to date, but the signals suggest they may not stay that way.
Triggers configured in a collections system that flag an account when defined risk signals appear, such as a returned Direct Debit, rising credit utilisation or a pattern of support contact. The alert prompts a review or an outbound contact before the account falls into arrears.
The FCA does not prescribe one. But its rules now cover customers who may have payment difficulties, not only those who do, and it has said lending products should include clear triggers and a way to agree temporary arrangements before arrears escalate. That is difficult to satisfy if the first intervention comes after a missed payment.
It can, if handled badly. The distinction is between contact that offers help and contact that presumes difficulty. Tone, timing and channel matter, and customers should be able to engage on their own terms rather than being pursued.
Leave your email and we'll send you the guide to read or share offline.